11) One possible reason for slower growth in developing and transition countries is A) capital may not be directed to its most productive use. B) strict accounting standards are too stringent for the banks to meet. C) the weak link between government and financial intermediaries. D) the lack of adverse selection and moral hazard problems.
11) One possible reason for slower growth in developing and transition countries is
A) capital may not be directed to its most productive use.
B) strict accounting standards are too stringent for the banks to meet.
C) the weak link between government and financial intermediaries.
D) the lack of adverse selection and moral hazard problems.
12) One reason financial systems in developing and transition countries are underdeveloped is
A) they have weak links to their governments.
B) they make loans only to nonprofit entities.
C) the legal system may be poor making it difficult to enforce restrictive covenants.
D) the accounting standards are too stringent for the banks to meet.
13) Because of the weak systems of property rights in many developing and transition economies, the financial system is unable to use collateral effectively worsening the ________ problem.
A) adverse selection
B) moral hazard
C) principal/agent
D) diversification
14) In developing countries, it can be expensive and time-consuming for the poor to legalize their property ownership. Without legal title, the property cannot be used as ________ to borrow funds.
A) collateral
B) points
C) interest
D) restrictive covenants
15) One reason China has been able to grow so rapidly even though its financial development is still in its early stages is
A) the high savings rate of around 40%.
B) the shift of labor to the agricultural sector.
C) the stringent enforcement of financial contracts.
D) the ease of obtaining high-quality information about creditors.
16) The high growth rate in China in the last twenty years has similarities to the high growth rate of ________ during the 1950s and 1960s.
A) the United States
B) the Soviet Union
C) Brazil
D) Mexico
17) Why does the free-rider problem occur in the debt market?
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